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"Flipkart’s days of heavy discounts might be over"

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Thursday, 31 May 2012

"Flipkart’s days of heavy discounts might be over"

Flipkart expanded its product portfolio to include home appliances, stationery to include 12 categories

As a testimony to the recent turmoil in the Indian e-commerce space, Business Standard today reported that investors are getting jittery about Flipkart’s slowing growth.

Flipkart would like to be India’s Amazon. They might even be on their way there, but they need to convince their investors. BS reports that analysts fear that Flipkart is making considerable losses on book transactions. This echoes the Firstpost report on Wednesday which spoke about the little elbowroom for categories such as books to grow in terms of margins given their deep discounts. And sustained discounting only makes it worse for Flipkart.

The company expanded its product portfolio to include home appliances, stationery and the recent addition was that of the lifestyle section including watches and bags. A portfolio now ranging across 12 categories. All of this was added in quick succession in the span of a year.This might be the result of investor pressure to clock profits which discounted book retail will not show.The BS report states that since books contribute close to 40% of the company’s revenue, Flipkart might consider reducing the heavy discounts that it now offers.

Although, Flipkart’s revenue has been steadily growing from Rs 11.6 crore in 2010 to Rs 50 crore in 2011, the three acquisitions it made —Weread.com (social discovery tool) in 2010 , MIME360 (online music distribution platform) in 2011 and the most recent Letsbuy.com, an electronics retailing site, must have been a cash-burner. Flipkart has also entered the music distribution space with Flyte which was launched in February this year.

Sachin Bansal has ruled out selling his company to strategic buyers. So what remains to be seen is if Flipkart will be bold enough and go public soon or take the beaten path and sell apparel, like its peers.

Labels: Social Media News, Technology News, Top news

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